Love is just a four-digit number: celebrating 10 years of Chip-and-PIN

Valentine’s Day is (for many) course a day of celebration, a day to pay undivided attention to that special someone in one’s life. To tell them that four-letter word and to have it reciprocated.

However, each Valentine’s Day since 2006 marks another year in which we’ve tried to keep a four-digit number – the key to all our finances – secret. Yes, this Sunday marked exactly ten years since all card transactions in the UK had to be Chip-and-PIN.

The technology that amusingly debuted on Valentine’s Day 2006 (a Tuesday) was, in the words of the UK Cards Association, “the culmination of the largest change in the way we pay in the UK since decimalisation in 1971”.

Since than, card spent has jumped. Ten years ago, 55 per cent of spending at retailers was made on payment cards, compared to 78.5 per cent in December 2015. Almost four in every five pounds of spending at British retailers is now made through debit and credit cards, the payments organisation said.

Chip-and-PIN was introduced as a means of combatting payment fraud on lost or counterfeit cards. Since it was introduced, there has been a reduction in fraud on counterfeit card and in high street fraud, with annual counterfeit card fraud losses alone down £81.9 million between 2004 and 2014.

“The introduction of Chip and PIN was a break with an 18th Century system which relied on signing pieces of paper to authorise a payment. Chip and PIN was deliberately designed so it could deliver significant technical innovation and these successes have included contactless and mobile payments, which use the same robust security features,” said Richard Koch, head of Policy at the UK Card Association.

Whilst 14th February, 2006 was the deadline before all transactions had to use EMV technology, the transition started much earlier with the likes of Barclays introducing the tech as early as 2003. It’s dates like this that make it truly staggering that a country such as the US, home of paradigm-shifting companies like Uber, Airbnb, Twitter etc. only initiated the shift to the EMV standard at the end of 2015, with the predicted date for near-universal acceptance being moved to 2017.

For now, cash is still king in America, whilst in the UK, the amount spent on debit and credit cards could reach £901 billion in 2024, according to UKCA.

Legacy

The technology was always meant to be forward looking, not future-proof per se, but protean enough to keep up with any significant innovations.

One such innovation was contactless, which only got off to a strong start because the Chip-and-PIN system provided a concrete infrastructure. The NFC tech now accounts for a tenth of all transactions and racks up over £1 billion per month.

A third (34 per cent) of merchants now takes contactless payments, with a further one in five (17 per cent) planning to start accepting this in the near future. One in four (23 per cent) now also accepts mobile payments, according to research from Barclaycard.

To highlight the increasing popularity of contactless, almost half (48 per cent) of consumers say that ‘touch and go’ is their preferred payment method now and one in five (19 per cent) feel annoyed if they can’t pay by contactless.

“The payments industry is continuing to advance at such a lightning pace that it’s easy to forget the days of magnetic stripe cards and the clunky carbon copy ‘zip zap’ machines. While ten years ago Chip and PIN was seen as revolutionary for speeding up the transaction process, the recent rise in contactless has made buying and selling even faster, making it a win-win for both shoppers and retailers,” said Tami Hargreaves Commercial Director, Digital Consumer Payments at Barclaycard.

I caught up with Guillaume Andre, Head of Marketing, Ingenico Northern Europe, to discuss the implications of a tech giant-payments provider collaboration-led future, and how Ingenico and Google might continue to innovate the POS system in the future.

The future is even closer than we think. The increasing pace of technological change means concepts formerly considered only abstract theories on a distant horizon are already nearly upon us. By Urs Gubser, Head E-Commerce, SIX Payment Services.

“The smart terminal has moved beyond just accepting payments", said Patrice Le Marre, EVP of the Banks & Acquirers Business Unit at Ingenico Group, said of the world's first Google Mobile Services and PCI-PTS v5 certified terminal.